supply chain terms, perfect for a beginner.
SCOR (Supply Chain Operations Reference) ⛓️ Think of this as a universal instruction manual for running a supply chain. It provides a standard framework for companies to plan, buy materials, make things, deliver them, and handle returns.
ERP (Enterprise Resource Planning) 💻 This is a central software system that connects all parts of a company (finance, manufacturing, HR, supply chain) into one integrated platform. It’s like the company’s “brain,” making sure everyone has the same information.
VMI (Vendor-Managed Inventory) 🤝 This is when a supplier (vendor) is responsible for managing the stock levels of their products at the customer’s location. It’s like your snack provider noticing your office vending machine is low on chips and refilling it automatically.
JIT (Just-in-Time) ⏱️ A strategy where materials arrive from suppliers exactly when they are needed in the production process. This minimizes waste and storage costs. Imagine baking a cake and having your ingredients delivered to your door the very moment you need to mix them.
KPI (Key Performance Indicator) 📊 A specific metric used to measure performance and success. For a delivery service, a key KPI would be the percentage of packages delivered on time.
3PL/4PL (Third/Fourth-Party Logistics) 🚚📦 These are outside companies that businesses hire to manage their shipping and warehousing. A 3PL handles the physical tasks (like driving trucks and storing goods). A 4PL is more of a strategic manager who oversees the entire logistics process, often hiring and managing multiple 3PLs.
S&OP (Sales & Operations Planning) 📈 A regular meeting where the sales team (who predict customer demand) and the operations team (who make and deliver the product) align their plans. It ensures the company produces the right amount of goods to meet expected sales.
RFID (Radio-Frequency Identification) 📶 A tracking technology that uses radio waves. A small tag is placed on an item, and it can be scanned from a distance without a direct line of sight. It’s like a super-barcode for tracking inventory in real-time.
TMS (Transportation Management System) 🗺️ Software that helps a company plan, execute, and optimize the physical movement of goods. It helps find the best shipping routes and carriers, and it tracks shipments from start to finish.
CSR (Corporate Social Responsibility) 🌍 A company’s commitment to operate in an ethical and sustainable way. This includes using ethically sourced materials, ensuring fair labor practices, and reducing environmental impact.
OTIF (On-Time In-Full) ✅ A performance metric that measures if an order was delivered to the customer on the correct date (On-Time) and with the correct items and quantities (In-Full).
MRP (Material Requirements Planning) ⚙️ A system that calculates the materials and components needed to manufacture a product. It creates a detailed schedule of what to buy, when to buy it, and how much to buy.
DRP (Distribution Requirements Planning) 🏭 A method used to plan orders within a supply chain. It helps determine how much product is needed at various distribution centers to meet expected demand.
WMS (Warehouse Management System) 🏢 Software that controls and manages all the day-to-day operations in a warehouse, from receiving and storing goods to picking, packing, and shipping orders.
MRO (Maintenance, Repair, Operations) 🔧 These are supplies needed to keep a business running but are not part of the final product. Examples include lubricants for machines, safety gloves, and cleaning supplies.
SKU (Stock Keeping Unit) 🏷️ A unique code, usually alphanumeric, that identifies a specific product. For example, a blue, large t-shirt would have a different SKU than a red, large t-shirt.
BOM (Bill of Materials) 📝 A complete list of all the raw materials, parts, and assemblies required to build one unit of a product. It’s the “recipe” for manufacturing an item.
PO (Purchase Order) 📄 An official document sent from a buyer to a seller that authorizes a purchase. It details the items, quantities, and agreed-upon prices.
RFP (Request for Proposal) 🙋 A formal document a company sends out when it wants to buy a service or product, inviting potential suppliers to submit bids to win the business.
SLA (Service-Level Agreement) 📜 A contract that defines the level of service a customer can expect from a supplier, laying out the metrics (like uptime or delivery times) by which that service is measured.
COGS (Cost of Goods Sold) 💲 The total direct costs of producing a product that a company sells. This includes the cost of materials and the labor directly used to create it.
ETA/ETD (Estimated Time of Arrival/Departure) ✈️🚢 ETA is the predicted time a ship, vehicle, or shipment will arrive at its destination. ETD is the predicted time it will leave its point of origin.
FIFO/LIFO (First-In, First-Out / Last-In, First-Out) ➡️⬅️ These are two methods for managing inventory. FIFO assumes that the first items placed in inventory are the first ones sold (like milk in a grocery store). LIFO assumes the last items added are the first ones sold.
CPFR (Collaborative Planning, Forecasting, and Replenishment) 👥 A business practice where supply chain partners (like a manufacturer and a retailer) work together to share information and align their plans for forecasting customer demand and restocking shelves.
